Using Capital as a Tool for Social Change: The i(x) Model
The world of finance has had a very bad week. With the recent news of scandal at Binary Capital it seemed like a good time for me to explain why i(x) investments is called i(x) investments — and what that might mean for you.
As math people notice immediately, i(x) is written in the form of an equation — “X” is the factor and “i” is either the individual or their investment.
The equation is also a question: how will you use your time and your investment(s) to make the world a better place?
The unfortunate reality for most investors is that they are not using their investment capital to make the world a better place. Plagued by the myth of concessionary returns, many people who care about the world and have active philanthropic lives fail to use their investment capital as a tool for social change.
Investment advisors are a big part of this problem. Most have little or no experience in the philanthropic world and as a result react with an impulsive negativity when the idea of making the world better and simultaneously creating profits is raised.
There are notable exceptions to this, for example:
Ascent — the high net worth group at U.S. Bank has an active and involved advisory practice in impact investing;
The CAPROCK Group represents over 100 families and routinely offers them impact investing opportunities without concessionary returns;
Through its acquisition of Imprint Capital, Goldman Sachs has entered the impact investing space in a meaningful way with a very smart and very focused team;
Encourage Capital was one of the pioneers in the space and continues to innovate with financial products addressing critical issues like forestry and the oceans;
Some of the most exciting innovations in finance are happening in early-stage investing in San Francisco — Obvious Ventures and Uprising are leaders in the space — blending innovative investments with social impact.
At i(x) investments, we believe that we must align our investments with our values and that in doing so there’s no need to forsake above market returns.
That’s also what the data shows. A Cambridge study showed that impact investing funds launched from 1998 through 2004 performed in line with or better than the comparative universe of non-impact investing funds.
In many ways, we have built i(x) investments for all of us, and I believe our timing is good.
A recent Bank of America study found that 85% of millennials consider their investment decisions as a way to express their social, political and environmental values, and 93% indicate that a company’s impact in these areas is an important consideration when they make investment decisions. These emerging investors don’t buy into the old dichotomy of nonprofit vs. for profit and they certainly aren’t looking to Washington D.C. to solve any of the problems we face.
Simply put, this represents a revolution in the world of finance.
You, as an individual, have the power to create change in the world — the way you invest is one of your most powerful tools.
Don’t let news about the world of finance create an impression that investors are either amoral…or worse. A new group of powerful and innovative investors is beginning to use capital as a tool of morality — aligning their investments with their values and using the power of the markets to address the world’s biggest problems.